A business law blog published by the business lawyers at AttorneyBritt - Gary L. Britt, CPA, J.D. Commentary and information regarding the laws and regulations applicable to individuals, corporations, partnerships, and limited liability companies (LLCs); as they relate to the myriad of business transactions, contracts, and agreements every business owner, shareholder, member, physician, and/or health care provider must consider.

Thursday, January 22, 2015

H&R Block: ‘No One Can Understand’ New Obamacare Tax Code

H&R Block, the nation’s largest retail tax preparation company
warns that the newly released Obamacare tax code, officially called the
Affordable Care Act, is likely to confuse millions of taxpayers who try
to tackle their tax returns for 2014.

“Now that the Affordable Care Act has made health care a tax issue,
no one can understand it,” H&R Block flatly tells taxpayers in a video that resides on its dedicated Obamacare web site.

A former IRS Commissioner agrees, and cautions that the new tax
requirements will be a “shock to the system,” especially afflicting
low-income earners who have never itemized on their tax return.
The tax preparation giant — with 24 million tax clients worldwide — reports that the Obamacare tax rules now constitute “the biggest tax code change in the last 20 years.”

The company is so concerned, it has launched a high profile national television advertising campaign directed solely at Obamacare enrollees. The ads were first broadcast the weekend of Jan. 10 during the NFL playoffs.
Illustrating H&R Block’s point is IRS Publication 5187, which
attempts to explain to taxpayers how to comply with the new Obamacare
tax requirements. That publication runs for a total of 21 single-spaced pages.

This year, for the first time, taxpayers will feel the full weight of
the Obamacare tax rules, which were enacted in 2010. The new tax code
regulations will apply to all Americans who file 2014 tax returns.

Some Obamacare users may discover that they need to repay the
government for the subsidies they received to cover their health
insurance premiums. A few will discover they were not entitled to
insurance at all.

Other taxpayers also will find their refunds are smaller, due to
penalties incurred because they didn’t enroll in a government-approved
health plan.
Penalties for non-compliance with Obamacare have tripled since 2013,
from $95 to an average of $301, according to an email to The Daily
Caller from software giant Intuit which runs TurboTax, a competitor to
H&R Block.

A large percentage of Obamacare enrollees are low-income earners who
opted for the program because they qualified for government subsidies
that would lower their monthly insurance payments.

H&R Block’s Tax Institute found in a national survey released
last fall that nearly three out of four low-income earners were not
aware of the need to file anything with the IRS because of their
Obamacare insurance.

“Lower-income respondents (72%) are significantly less likely than
other income brackets to be aware of the law,” the Institute reported.
Former IRS Commissioner Mark W. Everson, now vice chairman of
Alliantgroup, warns the new Obamacare requirements will deliver a “shock
to the system.”
“Low income filers are not used to itemizing and it will be a big
challenge for them,” he noted in an interview with TheDC. “You’re
introducing a whole new level of complexity.”

Grace Marie Turner, president of the non-profit Galen Institute and a
critic of Obamacare, calls the new IRS filing requirements “a
nightmare.”
“People don’t even know that they have to comply with this law through their tax filing,” she said in an interview with TheDC.

At the heart of the Obamacare tax rules are three new IRS health-related forms.
One is Form 1095, which will be sent to the estimated seven million Obamacare enrollees who received a federal subsidy.

Turner warned that many who will receive Form 1095 are likely to throw it out. “Many will think it’s junk mail.”

To prove they were entitled to subsidies, recipients will have to fill out a second document, Form 8962.

Mark Jaeger, a tax team leader at the software company Tax Act, which
competes with H&R Block, says Obamacare recipients will be “most
definitely” confused by Form 8962.

“If they’re trying to do it on their own doing, and do it by hand,
that’s going to be pretty difficult for the user,” he told TheDC.

Turner agrees. “Millions of people who were used to doing a simple
1040 EZ form are going to be required, now, to fill out this complicated
8962 tax form.”

A third form, 8965, is for taxpayers who did not have a government-approved health insurance plan in 2014 and wish to calculate their penalty.
The IRS never uses the word “penalty” but calls it an “individual shared responsibility payment.”

The penalty will either be a flat amount or there will be a penalty
for the tax filer, spouse, every child and dependent in a family. Form
8965 also is used if taxpayers believe they are entitled to an
exemption.

To arrive at their penalty, Form 8965 requires taxpayers to first
calculate their income “threshold,” and detail it for every month of the
year. The income threshold table is not part of the regular IRS
instructions and must be acquired from the ACA section of the IRS web
site.

The calculation is so complicated the IRS advises,
“Taxpayers should use the worksheets located in the Instructions to
Form 8965, Health Coverage Exemptions, to figure the shared
responsibility payment amount due.”

Andrew Townsend, another tax analyst for Tax Act, agreed in an
interview with TheDC that the 8965 “calculation is rather complicated.”

For help with your legal needs contact a business, tax, and health care law attorney at the offices of AttorneyBritt.

About Me

AttorneyBritt - Gary L. Britt, CPA, J.D. is both a lawyer and Certified Public Accountant (CPA). I have over 30
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